History UsefulNotes / Capitalism

Interestingly, the decreased importance of the traditional types of capital (land, peasants/slaves) means that the top echelons of today's capitalist class is not composed of the same families as that of three hundred years ago. This is because since then Industrial plant (19th century), Shares (20th Century), and Intellectual Property (21st Century) have become valuable forms of capital in their own right. Provided that new forms of capital do not become similarly valuable in the near future, the familial composition of the top echelons of the capitalist class should stabilise soon.

As with Socialism, the strict division of Capitalism's economic from its political aspects is a FalseDichotomy.

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As with Socialism, the strict division of Capitalism's economic from its political aspects is a FalseDichotomy.FalseDichotomy: Capitalism is an economic system, so by definition it cannot exist independently of human society and its politics.

The capitalist system is defined by a self-destructive trend, the growing inequality of wealth. This is what Thomas Piketty meant by "the past [devouring] the future".

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The Capitalism kills its hosts. This is because the capitalist system is defined by a self-destructive trend, the growing inequality of wealth. exponentially increasing wealth inequality, which creates socio-economic conditions that promote political rebellion. This is what Thomas Piketty meant by "the past [devouring] the future".future".

Economic stagnation is the inevitable result of growing wealth inequality because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption. Instead, they invest it in growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place.

In turn, economic stagnation delivers a stagnant and then declining standard of living for the majority of the population. This increases their incentives for rebellion to restructure the system in their own interests, particularly when they cannot survive their present standard of living. The capitalist class is also incentivised to translate their economic power into overt political power and become rulers in their own right.

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Economic stagnation is the inevitable result of growing wealth inequality because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption. Instead, they invest it in growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. \n\nIn turn, economic stagnation delivers a stagnant and then declining standard of living for the majority of the population. This increases their incentives for rebellion to restructure the system in their own interests, particularly when they cannot survive their present standard of living. The capitalist class is also incentivised to translate their economic power into overt political power and become rulers in their own right.

Interestingly, the decreased importance of the traditional types of capital (land, peasants/slaves) means that the top echelons of today's capitalist class is not composed of the same families as that of three hundred years ago. This is because since then Industrial plant (19th century), Shares (20th Century), and Intellectual Property (21st Century) have become valuable forms of capital in their own right. Provided that new forms of capital do not become similarly valuable in the near future, the familial composition of the top echelons of the capitalist class should stabilise soon.

Karl Marx famously asserted that the world's capitalist class would not allow reform of the wealth concentration dynamic in the capitalist system, and that this would make violent world revolution to destroy the capitalist system and replace it with {{UsefulNotes/Socialism}} inevitable. So far this prediction has proven pessimistic, as even the US government was willing and able to disrupt the development of wealth inequality in the period c.1940-1975.

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Karl Marx famously asserted that the world's capitalist class would not allow reform of block attempts to correct the wealth concentration dynamic in of the capitalist system, and that this would make violent world revolution to destroy the capitalist system and replace it with {{UsefulNotes/Socialism}} inevitable. So far this prediction has proven pessimistic, as even the US government was willing and able to disrupt the development of wealth inequality in the period c.1940-1975.

* Social Democrats advocate use of the free market where it seems to work and use of government intervention where the free market seems to fail (see role of government above). Whether Social Democrats are considered capitalists, socialists, both, or neither varies from person to person, even among Social Democrats themselves. Capitalism does allow for government intervention but social democrats are among the people mentioned above who see many market failures to correct.

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* Social Democrats advocate use of the free market where it seems to work and use of government intervention where the free market seems to fail (see role of government above). Whether Social Democrats are considered capitalists, socialists, both, or neither varies from person to person, even among Social Democrats themselves. themselves; the prominent historian Tony Judt wrote that "Social Democracy had always been a hybrid; indeed, this was just what was held against it by enemies to the Right and Left alike," and called it "a practice in lifelong search of its theory." Capitalism does allow for government intervention but social democrats are among the people mentioned above who see many market failures to correct.

* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the statistical tools of Kuznets and detailed investigation of the tax records published by the state authorities of France and the United States among others. This makes it the first real case for radical wealth redistribution in the classical-Keynesian tradition, backed by hard data and achieving universal academic recognition of the reality of r > g.[[note]] Most critics of every flavour of Capitalist and Socialist economic school did not understand the book in its entirety. This is readily apparent in many Neoliberal/Libertarian critiques, which accuse the book of being a Marxist tome. The closest anyone has come to a credible critique of Piketty and his argument has been Chris Giles of the Financial Times, whose 'critique' has consisted of pointing out minor (and inconsequential) errors in Piketty's data before presenting his own (very questionable, given that it disproportionately undervalues income for the extremely wealthy) data which claims that the historical growth of wealth inequality was not ''quite'' as bad as Piketty had calculated. However, even this was very far from an actual rebuttal of Piketty's data or conclusions [[/note]] However, academically credible doubts have been raised over whether his self-admittedly utopian solution (a worldwide 'wealth tax' of 2% on all wealth over a certain value) would adequately check r > g even if it could be implemented.

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* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the statistical tools of Kuznets and detailed investigation of the tax records published by the state authorities of France and the United States among others. This makes it the first real case for radical wealth redistribution in the classical-Keynesian tradition, and it is the first to be backed by such a wealth of hard data and achieving achieve such universal academic recognition of the reality of r > g.recognition.[[note]] Most critics of every flavour of Capitalist and Socialist economic school did not understand the book in its entirety. This is readily apparent in many Neoliberal/Libertarian critiques, which accuse the book of being a Marxist tome. The closest anyone has come to a credible critique of Piketty and his argument has been Chris Giles of the Financial Times, whose 'critique' has consisted of pointing out minor (and inconsequential) errors in Piketty's data before presenting his own (very questionable, given that it disproportionately undervalues income for the extremely wealthy) data which claims that the historical growth of wealth inequality was not ''quite'' as bad as Piketty had calculated. However, even this was very far from an actual rebuttal of Piketty's data or conclusions [[/note]] However, academically credible doubts have been raised over whether his self-admittedly utopian solution (a worldwide 'wealth tax' of 2% on all wealth over a certain value) would adequately check r > g even if it could be implemented.

* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the statistical tools of Kuznets and detailed investigation of the tax records published by the state authorities of France and the United States among others. This makes it the first real case for radical wealth redistribution in the classical-Keynesian tradition, backed by hard data and achieving a sizable academic consensus, although the book is still highly controversial among other economists who differ with Piketty's conclusions drawn from his research.

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* Thomas Piketty: Best known for his book ''Capital in the Twenty-First Century'' which has become #1 on the New York Times Non-Fiction bestseller list. Upon publication it was lauded as the most important book on economic theory and capitalist in the 21st Century by the likes of Paul Krugman, Emmannuel Todd, Paul Mason and several others. Piketty pointed out that inequality is a consequence of capitalism and can be checked and contained by state intervention and wealth redistribution, chiefly a global progressive income tax and restrictions on inherited wealth. Piketty pointed out that over time, when the rate of return on capital (r) is greater than the rate of economic growth (g) the result is concentration of wealth, and rather than trickling down, it merely increases the wealth gap if left unchecked and this leads to political and economic instability. While the title alludes to Creator/KarlMarx and makes countless references to the man in the book, Piketty is firmly in the tradition of classical and Keynesian economics and he argues by means of classical data collection and information tools, chiefly the statistical tools of Kuznets and detailed investigation of the tax records published by the state authorities of France and the United States among others. This makes it the first real case for radical wealth redistribution in the classical-Keynesian tradition, backed by hard data and achieving a sizable universal academic consensus, although recognition of the reality of r > g.[[note]] Most critics of every flavour of Capitalist and Socialist economic school did not understand the book in its entirety. This is still highly controversial among other economists who differ with readily apparent in many Neoliberal/Libertarian critiques, which accuse the book of being a Marxist tome. The closest anyone has come to a credible critique of Piketty and his argument has been Chris Giles of the Financial Times, whose 'critique' has consisted of pointing out minor (and inconsequential) errors in Piketty's data before presenting his own (very questionable, given that it disproportionately undervalues income for the extremely wealthy) data which claims that the historical growth of wealth inequality was not ''quite'' as bad as Piketty had calculated. However, even this was very far from an actual rebuttal of Piketty's data or conclusions drawn from [[/note]] However, academically credible doubts have been raised over whether his research. self-admittedly utopian solution (a worldwide 'wealth tax' of 2% on all wealth over a certain value) would adequately check r > g even if it could be implemented.

In the capitalist system, the average returns to the owership of capital[[note]] increase in the value of property including companies, shares & bonds, land, factory plant, money, etc [[/note]] (r) have always exceeded the average growth of incomes (g). If not checked this process eventually produces economic stagnation and wealth inequality, which leads to political unrest, which leads to the market's dissolution.

This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it in growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to acquire political power and become rulers in their own right.

Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

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In the The capitalist system, system is defined by a self-destructive trend, the growing inequality of wealth.

This is because the average returns to the owership of capital[[note]] increase in the value of property including companies, shares & bonds, land, factory plant, money, etc [[/note]] (r) have always exceeded the average growth of incomes (g). If not checked When left unchecked, this process eventually produces economic stagnation and wealth extreme inequality, which leads to produces political unrest, which leads to the market's dissolution.

This occurs dissolution and replacement by smaller political-economic government-markets.

Economic stagnation is the inevitable result of growing wealth inequality because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, consumption. Instead, they invest it in growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to acquire political power and become rulers in their own right.

In turn, economic stagnation delivers a stagnant and then declining standard of living for the majority of the population. This increases their incentives for rebellion to restructure the system in their own interests, particularly when they cannot survive their present standard of living. The capitalist class is also incentivised to translate their economic power into overt political power and become rulers in their own right.

Peasant and Noble rebellions resulting from the long-term trend of ''r > g'' and short-term shocks caused by natural disasters and wars were major causes for the disintegration of notable empires including The Ming and Western Rome.

Like its competitor UsefulNotes/{{Socialism}}, Capitalism is an [[UsefulNotes/{{Economics}} economic model]] which governments implement to enable people to work for access to scarce goods and services. Unlike Socialism, Capitalism allows people to own and profit from 'Capital'. This increases their access to goods and services, and reduces or eliminates their need to work to access them.

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Like its competitor UsefulNotes/{{Socialism}}, Capitalism is an [[UsefulNotes/{{Economics}} economic model]] which governments implement to enable people to work for access to scarce goods and services. Unlike Socialism, Capitalism allows people to own and profit from 'Capital'. This increases their The more Capital one owns, the greater one's access to goods and services, services - and reduces lesser or eliminates their non-existent one's need to work to access them.

This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to acquire political power and become rulers in their own right. Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

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This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it in growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to acquire political power and become rulers in their own right.

Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

Capitalism is an [[UsefulNotes/{{Economics}} economic model]] which governments implement to enable people to work in exchange for scarce goods and services. The strict division of Capitalism's economic from its political aspects is a FalseDichotomy.

UsefulNotes/{{Socialism}} is its biggest competitor.

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->''"Cash Rules Everything, Around Me (C.R.E.A.M.)\\Get ->''"The entrepreneur inevitably tends to become a rentier, more and more dominant over those who own nothing but their labour. Once constituted, capital reproduces itself faster than output increases. The past devours the money\\Dolla, dolla bill y'all"''-->--'''Music/WuTangClan'''

future."'''-->--'''Thomas Piketty'''

Like its competitor UsefulNotes/{{Socialism}}, Capitalism is an [[UsefulNotes/{{Economics}} economic model]] which governments implement to enable people to work in exchange for access to scarce goods and services. The Unlike Socialism, Capitalism allows people to own and profit from 'Capital'. This increases their access to goods and services, and reduces or eliminates their need to work to access them.

As with Socialism, the strict division of Capitalism's economic from its political aspects is a FalseDichotomy.

Capitalism is a political-economic system wherein the individuals of the 'capitalist class' own 'the means of production' and dominate economic and political life. This is the simplest and least problematic definition.

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Capitalism is a political-economic system wherein the individuals of the 'capitalist class' own 'the ('capitalists'):

* Own capital/the means of production' and dominate production: the physical, non-human inputs used for the production of economic value, such as facilities, machinery, tools, infrastructural capital and political life. This is the simplest and least problematic definition.natural capital.* Dominate economic-political life.

'''The Central Contradiction: r > g'''

In the capitalist system, the average returns to the owership of capital[[note]] increase in the value of property including companies, shares & bonds, land, factory plant, money, etc [[/note]] (r) have always exceeded the average growth of incomes (g). If not checked this process eventually produces economic stagnation and wealth inequality, which leads to political unrest, which leads to the market's dissolution.

This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to acquire political power and become rulers in their own right. Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

In the capitalist system, the average returns to the owership of capital[[note]] increase in the value of property including companies, shares & bonds, land, factory plant, money, etc [[/note]] (r) have always exceeded the average growth of incomes (g). If not checked this process eventually produces economic stagnation and wealth inequality, which leads to political unrest, which leads to the market's dissolution.

This occurs because economic activity is driven by consumption, and sufficiently wealthy individuals do not spend the bulk of their wealth on consumption - instead, they invest it growing their wealth. As more and more of the total wealth in a capitalist market-society is invested and not spent upon consumption, less and less economic activity takes place. This results in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for the majority. This increases their incentives for rebellion to restructure the system in their own interests. Likewise, individual members of the capitalist class are incentivised to acquire political power and become rulers in their own right. Peasant and Noble rebellions resulting from ''r > g'' were major causes for the disintegration of notable empires including The Ming and Western Rome.

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'''Capital Accumulation: r > g'''

In '''Government maketh Market: minutiae''

Capitalist economists are divided on how government should define the capitalist system, the average returns market:* ''Enforcing Property Rights'': Stealing is wrong. Not only is theft generally agreed upon to morally damaging to the owership individual who steals, and causes suffering to those who are stolen from, but widespread theft (such as the looting that occurs in riots) creates massive market inefficiencies, and thus widespread theft would be a market failure. According to capitalists, if someone desires a product they should pay the agreed-upon price. Fraud is considered a form of capital[[note]] stealing (as theft by trick) so it would fall under this.** There is much debate on what counts as stealing. Supporters of capitalism believe that using or taking the private property and personal possessions of someone else is stealing, whereas socialists only believe that using or taking the personal possessions of someone else is stealing. Finally, anarcho-capitalists would not only agree with the former, but also go further and add that enforcing the collection of taxes is stealing too.*** There is even some debate as to what someone can actually own, such as intellectual property. Supporters say that as it was made by someone, the idea belongs to the creator. If creators did not own their own ideas other people could steal them and use someone else's ideas to make a lot of money at the expense of the creator. For example, if Alice were a small businesswoman who discovered a way to manufacture cars more efficiently, Bob, who already has a big business and thus all of the infrastructure in place, could take Alice's idea and apply it to his own plants. Now Alice has payed the R&D costs for the research but Bob is the one making the money on her idea. Opponents say that the reason we have property in the first place is to manage finite resources and define property as "something one person owns to the exclusion of other people owning it." For example, if Alice owned a pencil Bob could not use that pencil without first taking it from Alice. Ideas, on the other hand, are infinite, that is one person can have it and someone else can use it without diminishing the first person's 'ownership' of it. For example, if Alice owned a book and Bob copied it onto his own paper, both of them can still enjoy the book. It has also been studied multiple times as to whether or IP laws help innovation, with most studies actually showing neutral or negative effect. * ''Providing Public Services'': Some things, such as lighthouses, well-maintained roads, and clean air are considered impossible for an individual person or organization to make a profit from because property rights are near impossible to enforce on these things. The government however can pay for these things with tax money, which they can force everyone to pay. Whether they ''should'' do this is the subject of debate among the many different schools of economic thought. See below.** Included in this could be considered the funding of unprofitable markets until the kinks can be worked out enough for the private sector to make a profit in these markets. Various examples that are pointed to are the funding of the earlier voyages in the age of exploration that spanned the fifteenth to seventeenth centuries, the space race, cancer research, and non-fossil fuel energy sources.* ''Helping Out In Recessions'': Recessions are viewed as a natural consequence of capitalism. The free market naturally goes through ups and downs. What you can do without abolishing capitalism outright, which isn't an option for the overwhelming majority of economists, is make the ups last as long as possible while making the downs last as little as possible. If the economy is bad enough, the government can either print more money or increase in spending to boost the value economy. It is an agreed principle of property including companies, shares & bonds, land, factory plant, money, etc [[/note]] (r) have always exceeded the average growth of incomes (g). If not checked this process eventually produces economics that these government actions ''can and will'' cause economic stagnation expansion, but whether they should is debated by the left and wealth inequality, which leads to political unrest, which leads right. (See different schools below.) * ''Regulating Monopolies and Oligopolies'': The problem with monopolies is that due to the market's dissolution.

This occurs because economic activity is driven by consumption, law of diminishing returns, it's impossible for them to make a profit making huge quantities of a product, so prices naturally stay high. The government can intervene in these situations and sufficiently wealthy individuals either force the company to break up, put a minimum limit on how much they have to produce, put a maximum limit on how much they can charge, and/or use tax money to reimburse the company for any lost profits if they increase supply.There is also a debate whether monopolies can arise at all without government regulations, tariffs, and taxes, that create more barriers to entry in the market. The problem with oligopolies is it reduces the likelihood that individual suppliers will renege on a deal to keep total supply in the economy as low as possible. The government can regulate these in a similar manner. Again, whether the government should regulate mono/oligopolies is debated. Though a moderate consensus is that governments should break up mono/oligopolies as well prevent them from forming, what constitutes a mono/oligopoly is not agreed upon. Further to the left, economists believe that the state should assume control of a mono/oligopoly if it is naturally occurring, such as in the generally agreed-upon case of water or energy suppliers (it is extremely hard to foster competition when actual land control is involved). Further to the right, it is argued that the side effects of the government trying to combat the mono/oligopoly will lead to far worse results than if just left alone.* ''Regulating The Money Supply'': Money is the lifeblood of a capitalist/market economy. If the amount of money circulating in the economy is higher than the demand for money it will cause inflation. If the amount of money circulating in the economy is lower than the demand it will cause deflation. Modern-day Austrians[[note]]Austrian here refers to a school listed below[[/note]] like Ron Paul do not spend believe the bulk of their wealth on government should do this, but even among right-wing economists the need for the government to have a monetary regime is widely supported. (To wit, the person who has used the central bank in the US to increase the money supply most is Ben Bernanke, a Republican.)* ''Banning Products'': Markets will produce whatever people are willing to pay for even if the product isn't good for society (think fast food, or cigarettes). In these cases, government intervention is the only way to stop production and consumption - instead, of them. This creates the black market problem however, such as in the case of illegal drugs. Thus, whether banning the creation of certain products should happen is, again, hotly debated.* ''Bailing Out Companies'': Some companies are considered "too big to fail" . If they invest it growing go under, their wealth. As more and more suppliers may have to lay people off or go under as well because of the total wealth in a capitalist market-society is invested and not spent upon consumption, lost business. The unemployed workers now have less money coming in and less economic activity takes place. This results this could affect demand in weakening economic growth, then stagnation - which delivers a stagnant and then declining standard of living for other markets. In situations like this the majority. This increases government can step in but this is very controversial. Opponents saying doing this prevents companies from learning from their incentives for rebellion to restructure mistakes and enforces the system behavior that required the bailout in their own interests. Likewise, individual members the first place, however, the people most often proposing a bailout are also the people most likely to support regulations that would prevent further occurrences of that "bad behavior". Bailouts are actually a wide variety of fiscal practices, ranging from a simple loan from the government to short-term nationalization of the capitalist class are incentivised to acquire political power and become rulers in their own right. Peasant and Noble rebellions resulting from ''r > g'' were major causes firm. (IE, the government owns the company for the disintegration a certain period of notable empires including The Ming and Western Rome.time.)

The Law of Diminishing Returns states that the higher quantity of a product you make within a certain period of time the higher the cost of making an individual piece of that quantity. As an example if it costs two dollars to produce a single bottle in one day, and it will cost more than four dollars to make two bottles in one day. For the sake of this example lets say it costs five dollars to make two bottles and each additional bottle costs an extra dollar to produce in one day.

As mentioned above individual sellers have no control over prices and have to accept whatever the market price is. Going with the above example if the market price for bottles is seven dollars then sellers will make a profit off the first five bottles they produce, make even on the sixth one, and lose money on any consecutive bottles made within one day. If an individual seller wants to make a profit from any bottles after the fifth one either the price has to go up or production costs have to be lowered. Additionally, the producer can slow down the rate of production to produce only a profitable amount of bottles per day.

As for why each additional product costs more to produce than the last, imagine you are starving so you go to a fast food restaurant and order burgers. The first few burgers you buy taste delicious and are quenching your hunger. After a while it becomes less rational to spend money on burgers because if you eat enough you'll puke. (This is a related concept called '''marginal utility'''. Think of it this way: you are always asking "Do I want '''another''' burger?" and you keep eating until you want another burger less than it costs. For prices, it's this point where you stop buying burgers and the restaurant stops selling them that matters.)

Another analogy would be someone who owns an apple orchard. In a few hours her workers could go through and easily pick all the apples off of the bottom branches. The ones on the top branches however require more effort to get to. If a profit is to be made from those prices have to be increased. In a factory setting adding a few workers will increase productivity because they can specialize on specific tasks, but if you add enough workers, people will be bumping into each other. Some workers will also be standing around doing nothing because there aren't any tasks to do. Paying these workers their wages is a waste of the employer's money because no profit is coming from it. Whether all situations operate in this manner is debatable but it's a well-observed effect.

'''Economies of Scale'''

Economies of Scale refers to a situation where it is cheaper for a business to produce more of an item than less. Think of it as like buying in bulk, but for producers.

It costs a great deal to make one hand-built automobile, as it takes a few skilled workers a fairly long period of time to make it using hand tools and whatnot. Since this manufacture of only one unit of product takes a long period of time and uses skilled laborers (who earn more money than unskilled), the end product (a hand-built car) ends up costing a lot of money.

It costs far less to make one machine-manufactured automobile because of the economy of scale. This states that an efficient production process that makes the product faster with unskilled laborers can in turn make more product in a far shorter period of time and therefore cost less to make and sells for a lower price. The entire industrial revolution is built upon this concept.

For a good real-life example: look at a Ford Model T or a Volkswagen Beetle. Making either car by hand would result in a far slower turnout and a more expensive product, but the entire point of both vehicles was a cheaper product for the masses. They were cheaper because the more of them were made, the cheaper they became to manufacture: the beginning capital (factory construction, machinery purchase, etc.) was far greater than making a hand-built car, but the volume of the sales made up for it.

In some cases, economies of scale make it cheaper to ''waste'' some materials than to make what is necessary because there are costs at each price point (the number of items being made) where going to a larger quantity may be cheaper even if a lot of the material is simply wasted or recycled. A university newspaper on the US West Coast has a daily newspaper, which, to serve the campus community and visitors, needs about 30,000 copies each day. The newspaper has ''50,000'' copies printed each issue and recycles 20,000, because at 50,000 they can use much less expensive (and more automated) offset printers, but a lower quantity would use a less efficient system and be more expensive, even though almost half of the printing order is pure waste.

'''Role of government'''

Capitalist economists are divided on the exact role the government should play in the economy. Some of those roles include:* ''Enforcing Property Rights'': Stealing is wrong. Not only is theft generally agreed upon to morally damaging to the individual who steals, and causes suffering to those who are stolen from, but widespread theft (such as the looting that occurs in riots) creates massive market inefficiencies, and thus widespread theft would be a market failure. According to capitalists, if someone desires a product they should pay the agreed-upon price. Fraud is considered a form of stealing (as theft by trick) so it would fall under this.** There is much debate on what counts as stealing. Supporters of capitalism believe that using or taking the private property and personal possessions of someone else is stealing, whereas socialists only believe that using or taking the personal possessions of someone else is stealing. Finally, anarcho-capitalists would not only agree with the former, but also go further and add that enforcing the collection of taxes is stealing too.*** There is even some debate as to what someone can actually own, such as intellectual property. Supporters say that as it was made by someone, the idea belongs to the creator. If creators did not own their own ideas other people could steal them and use someone else's ideas to make a lot of money at the expense of the creator. For example, if Alice were a small businesswoman who discovered a way to manufacture cars more efficiently, Bob, who already has a big business and thus all of the infrastructure in place, could take Alice's idea and apply it to his own plants. Now Alice has payed the R&D costs for the research but Bob is the one making the money on her idea. Opponents say that the reason we have property in the first place is to manage finite resources and define property as "something one person owns to the exclusion of other people owning it." For example, if Alice owned a pencil Bob could not use that pencil without first taking it from Alice. Ideas, on the other hand, are infinite, that is one person can have it and someone else can use it without diminishing the first person's 'ownership' of it. For example, if Alice owned a book and Bob copied it onto his own paper, both of them can still enjoy the book. It has also been studied multiple times as to whether or IP laws help innovation, with most studies actually showing neutral or negative effect. * ''Providing Public Services'': Some things, such as lighthouses, well-maintained roads, and clean air are considered impossible for an individual person or organization to make a profit from because property rights are near impossible to enforce on these things. The government however can pay for these things with tax money, which they can force everyone to pay. Whether they ''should'' do this is the subject of debate among the many different schools of economic thought. See below.** Included in this could be considered the funding of unprofitable markets until the kinks can be worked out enough for the private sector to make a profit in these markets. Various examples that are pointed to are the funding of the earlier voyages in the age of exploration that spanned the fifteenth to seventeenth centuries, the space race, cancer research, and non-fossil fuel energy sources.* ''Helping Out In Recessions'': Recessions are viewed as a natural consequence of capitalism. The free market naturally goes through ups and downs. What you can do without abolishing capitalism outright, which isn't an option for the overwhelming majority of economists, is make the ups last as long as possible while making the downs last as little as possible. If the economy is bad enough, the government can either print more money or increase spending to boost the economy. It is an agreed principle of economics that these government actions ''can and will'' cause economic expansion, but whether they should is debated by the left and right. (See different schools below.) * ''Regulating Monopolies and Oligopolies'': The problem with monopolies is that due to the law of diminishing returns, it's impossible for them to make a profit making huge quantities of a product, so prices naturally stay high. The government can intervene in these situations and either force the company to break up, put a minimum limit on how much they have to produce, put a maximum limit on how much they can charge, and/or use tax money to reimburse the company for any lost profits if they increase supply.There is also a debate whether monopolies can arise at all without government regulations, tariffs, and taxes, that create more barriers to entry in the market. The problem with oligopolies is it reduces the likelihood that individual suppliers will renege on a deal to keep total supply in the economy as low as possible. The government can regulate these in a similar manner. Again, whether the government should regulate mono/oligopolies is debated. Though a moderate consensus is that governments should break up mono/oligopolies as well prevent them from forming, what constitutes a mono/oligopoly is not agreed upon. Further to the left, economists believe that the state should assume control of a mono/oligopoly if it is naturally occurring, such as in the generally agreed-upon case of water or energy suppliers (it is extremely hard to foster competition when actual land control is involved). Further to the right, it is argued that the side effects of the government trying to combat the mono/oligopoly will lead to far worse results than if just left alone.* ''Regulating The Money Supply'': Money is the lifeblood of a capitalist/market economy. If the amount of money circulating in the economy is higher than the demand for money it will cause inflation. If the amount of money circulating in the economy is lower than the demand it will cause deflation. Modern-day Austrians[[note]]Austrian here refers to a school listed below[[/note]] like Ron Paul do not believe the government should do this, but even among right-wing economists the need for the government to have a monetary regime is widely supported. (To wit, the person who has used the central bank in the US to increase the money supply most is Ben Bernanke, a Republican.)* ''Banning Products'': Markets will produce whatever people are willing to pay for even if the product isn't good for society (think fast food, or cigarettes). In these cases, government intervention is the only way to stop production and consumption of them. This creates the black market problem however, such as in the case of illegal drugs. Thus, whether banning the creation of certain products should happen is, again, hotly debated.* ''Bailing Out Companies'': Some companies are considered "too big to fail" . If they go under, their suppliers may have to lay people off or go under as well because of the lost business. The unemployed workers now have less money coming in and this could affect demand in other markets. In situations like this the government can step in but this is very controversial. Opponents saying doing this prevents companies from learning from their mistakes and enforces the behavior that required the bailout in the first place, however, the people most often proposing a bailout are also the people most likely to support regulations that would prevent further occurrences of that "bad behavior". Bailouts are actually a wide variety of fiscal practices, ranging from a simple loan from the government to short-term nationalization of the firm. (IE, the government owns the company for a certain period of time.)

In 'Classical Economics' it is assumed that [[ViewersAreGeniuses consumers are completely rational and always looks for the best, lowest price before buying a product that they want if buying it will make them happier than having the money needed to buy it.]] These mathematically simple individual and small scale 'microeconomic' interactions are then substituted into mathematically complicated functions which describe 'macroeconomic' interactions - which were used to govern the world's economies from the 1970s until the Great Recession of 2008. Unfortunately, it transpired that actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality.

Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the behaviour of real humans by using psychological studies of real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have been produced by using statistics collected from the real world. For now, so-called 'Empirically-based Economics' which uses the Scientific Method and real world data seems to be in vogue.

All that said, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy if people acted like Rational Consumers and not like, well, people.

to:

In 'Classical Economics' it is assumed that every person and corporate entity is a rational entity which always:

* Makes completely informed, or equally informed, decisions.* Makes rational decisions about what and whether to buy or sell in accordance with a combination of their personal finance and a limited set of desires.* Always buys at the lowest possible, and sells at the highest possible, price.* Values potential gains and losses equally.* Values owned and unowned property with monetary values equally (see above).

[[ViewersAreGeniuses consumers are The Rational Consumer is completely rational and always looks for the best, lowest price before buying a product that they want if buying it will make them happier than having the money needed to buy it.]] These The mathematically simple individual and small scale 'microeconomic' interactions which use The Rational Consumer are then substituted into mathematically complicated functions which describe 'macroeconomic' interactions - which were used to govern the world's economies from the 1970s until the Great Recession of 2008. Unfortunately, it transpired that actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality.2008.

Unfortunately, actual people and corporate entities:

* Vary wildly and unpredictably in their level of access to information.* Make semi-rational and semi-impulsive decisions about what and whether to buy or sell given their broad and shifting set of desires, which often take precedence over their personal finance.* Buy/sell not just at the lowest/highest price, but at a perceived 'fair' price.* Are ''far'' less motivated by potential gains than they are fearful of losses. * Value owned property drastically more than unowned property, even when they are of equal monetary value (see above).

Actual human behaviour departs so far and so inconsistently from that which is predicted by the ''Rational Consumer'' model that the 'macroeconomic' models which use it are incapable of describing or predicting how the economy works in reality. Still, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy [[WhyCouldntYouBeDifferent if only people acted like Rational Consumers]] [[ShapedLikeItself and not like, well, people]].

Recently, 'Behavioural Economics' has produced microeconomic models capable of accurately predicting the human behaviour of real humans by using psychological studies of real people's actual consumption habits (which are logically inconsistent, impulsive, and mood-dependent). It is hoped that this discipline can be resolved with the macroeconomic models capable of accurately describing and predicting how the economy works in reality, which have been produced by using statistics collected from the real world. For now, so-called 'Empirically-based Economics' which uses the Scientific Method and real world data seems to be in vogue. \n\nAll that said, it is hard to contradict the assertion that Classical Economics ''could'' perfectly model the capitalist economy if people acted like Rational Consumers and not like, well, people.

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